Why policymakers simply cannot afford to neglect India’s vast agricultural sector

These are impressive numbers for a sector that employs the highest number of workers in India’s economy. But also because they outshine the sector’s own past performance. Yet, data from the field also suggests that the agrarian sector is in its longest and deepest phase of distress as far as income levels go.

Part of this contradictory assessment of agriculture stems from the way its data is collected and made available. While growth rates are generally presented in aggregate terms for agriculture and its allied sectors, agricultural sub-sectors do not show the same dynamism as the aggregate.

Agriculture and allied sectors comprise farm crops, livestock, forestry, logging and fishing and aquaculture. Of these, the crops sub-sector accounts for 54%, livestock 30%, forestry 8% and fishery the rest. Much of the growth in agriculture and allied sectors is driven by growth in livestock, which has expanded at more than 7% per year, and fisheries, which has grown at more than 8% in the last decade.

On the other hand, the largest sub-sector of crops has grown at just 2% annually. It includes major crops such as cereals, edible oils, pulses, cotton and sugarcane, along with horticultural crops such as fruits, vegetables and flowers. It is also the largest employer of agricultural workers along with livestock. To put it in perspective, the crops sector grew at 3.3% annually between 2004 and 2014. But its recent decadal growth is among the lowest in three.

While the underlying database for livestock, fisheries and forestry is weaker than for crops, its annual growth of more than 7% in the last decade seems suspicious. Past trends suggested that the livestock sub-sector had grown at a rate similar to that of crops, or marginally higher, given the close linkages between the two and because most farmers in India are involved in crop cultivation as well as livestock rearing.

While national accounts data suggests faster livestock growth, data from the Situation Assessment Survey (SAS) shows slower growth. However, what matters for the majority of farmers is growth in crops, for which even the national accounts point to weaker growth than other segments.

This weakness is also seen in India’s household survey on income and indirect estimates of it from national accounts. This data confirms a decline in real cultivation income, with households supplementing earnings through wage work. But with wages almost stagnant in the last decade, it’s insufficient to raise household incomes. Indirect income estimates from the national accounts that follow the Niti Aayog methodology actually suggest a decline in the income of farmers of 0.62% per year between 2016-17 and 2023-24.

Not only does this raise questions on the government’s claim of doubling farmer incomes, it confirms a worsening of earnings and profitability. To put it in perspective, farmer incomes increased 7.5% per annum between 2004-05 and 2011-12. Even on a decadal basis, the increase between 2004-05 and 2014-15 was a strong 6%.

The decline in agricultural incomes has come at a time when the number of workers in the sector has been rising. Almost 66 million workers joined the sector in the last six years, reversing the entire fall in their number between 2004-05 and 2017-18. This is not due to agriculture offering better remuneration, but on account of distress in non-agricultural sectors that are failing to provide remunerative employment.

This structural reversal in the economy of workers moving back to agriculture is evidence of the gravity of the crisis we face, more so in the rural economy.

This has occurred despite farmers trying hard to increase productivity and can be viewed in the context of an adverse policy environment. Government investment in agriculture has been weakening in recent years. The state’s basic price-support mechanism has also not helped stabilize the prices of farm output. There has been a decline in the farm-gate prices of a majority of crops this year. While food inflation has dropped, so has the price realization of farmers.

Agriculture needs to be revived not only because it employs almost half of all our workers, but to drive a long-term revival in India’s economy. With private investment failing to pick up and exports slow, we need a domestic demand revival to sustain the economy’s growth momentum.

The author is associate professor at Jawaharlal Nehru University and visiting fellow at the Centre de Sciences Humaines, New Delhi.